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The Cluster as Market Organization

Author

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  • Peter Maskell
  • Mark Lorenzen

Abstract

The many competing schools of thought concerning themselves with industrial clusters have at least one thing in common: they all agree that clusters are real life phenomena characterized by the co-localization of separate economic entities, which are in some sense related, but not joined together by any common ownership or management. So hierarchies they are certainly not. Yet, it is usually taken for granted that clusters, almost regardless of how they are defined, all expatriate the 'swollen middle' of various hybrid 'forms of long-term contracting, reciprocal trading, regulation, franchising and the like' residing somewhere between hierarchies and markets. This fundamental (but usually implicit) assumption would, perhaps, be justified if markets could be reduced to events of exchange of property rights, between large numbers of price-taking anonymous buyers and sellers supplied with perfect information as they are commonly conceived in mainstream economics. One of the original attractions of Neoclassical price theory was precisely that it promised a way of analysing the economy in general and market exchange in particular independently of specific institutional settings. However, introducing transaction costs as more than fees paid to intermediaries leads inevitably to comparative institutional analysis and, not to be forgotten, to the perception of markets as institutions with specific characteristics of their own. Some sets of characteristics are so common that they represent a specific market organization or market form. The cluster is one such specific market organization that is structured along territorial lines because this enables the building of a set of institutions that are helpful in conducting certain kinds of economic activities. Supported by empirical illustrations the paper argues that clusters are markets where commodities, services and knowledge are traded in a notably efficient way among the insiders without restricting their abilities to build pipelines and to interact with suppliers and customers residing elsewhere. The institutions characterizing this market form help creating an environment among insiders that reduces the barriers to acquiring and utilising knowledge produced or used locally.

Suggested Citation

  • Peter Maskell & Mark Lorenzen, 2003. "The Cluster as Market Organization," DRUID Working Papers 03-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  • Handle: RePEc:aal:abbswp:03-14
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Thomas Brenner & André Mühlig, 2007. "Factors and Mechanisms Causing the Emergence of Local Industrial Clusters - A Meta-Study of 159 Cases," Papers on Economics and Evolution 2007-23, Philipps University Marburg, Department of Geography.
    2. David Hojman, 2005. "Network Learning, Principal-Agent Conflict, and Award-Winning Wine-Making in Chile's Colchagua Valley," Research Papers 200512, University of Liverpool Management School.
    3. Alexander Cole, 2007. "Beyond the Knowledge-Based Theory of the Geographic Cluster," Papers in Evolutionary Economic Geography (PEEG) 0708, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2007.
    4. Götz Marta & Jankowska Barbara & Główka Cezary, 2014. "How to Investigate Polish Clusters’ Attractiveness for Inward FDI? Addressing Ambiguity Problem," International Journal of Management and Economics, De Gruyter Open, vol. 43(1), pages 74-93, September.
    5. Pitelis, Christos & Pseiridis, Anastasia, 2007. "A Conceptual Framework for Firm Cooperation and Clusters and Their Impact on Productivity and Competitiveness," Papers DYNREG13, Economic and Social Research Institute (ESRI).
    6. Ozlem Ozkanli & Erkan Erdil & Erdal Akdeve, 2008. "Innovation And Relationships In Industrial Districts: The Case Of Turkey," STPS Working Papers 0801, STPS - Science and Technology Policy Studies Center, Middle East Technical University, revised Aug 2008.
    7. Wixted, Brian, 2006. "Cluster Complexes: A Framework for Understanding the Internationalisation of Innovation Systems," MPRA Paper 846, University Library of Munich, Germany.
    8. Wedemeier, Jan, 2009. "Creative cities and the concept of diversity," HWWI Research Papers 1-20, Hamburg Institute of International Economics (HWWI).
    9. Mark Lorenzen & Lars Frederiksen, 2005. "On the Economics of Innovation Projects Product Experimentation in the Music Industry," DRUID Working Papers 05-23, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    10. Alessandro Rosiello, 2006. "The Geography of Knowledge Transfer and Innovation in Biotechnology: The Cases of Scotland, Sweden and Denmark1," European Planning Studies, Taylor & Francis Journals, vol. 15(6), pages 787-815, May.
    11. Erkan Erdil & Dilek Cetin, 2008. "Innovation and Relationships in an Organized Indutrial District: Ankara Sincan Industrial District," STPS Working Papers 0802, STPS - Science and Technology Policy Studies Center, Middle East Technical University, revised Aug 2008.
    12. Paul Muller & Julien Pénin, 2006. "Why do firms disclose knowledge and how does it matter?," Journal of Evolutionary Economics, Springer, vol. 16(1), pages 85-108, April.
    13. Igor Pilipenko, 2005. "Clusters and Territorial-Industrial Complexes - Similar Approaches or Different Concepts? - first Evidence from Analysis of Development of Russian Regions," ERSA conference papers ersa05p70, European Regional Science Association.
    14. Luciana Lazzeretti & Rafael Boix & Francesco Capone, 2008. "Do creative industries cluster? Mapping Creative Local Production Systems in Italy," Working Papers wpdea0805, Department of Applied Economics at Universitat Autonoma of Barcelona.
    15. Luciana Lazzeretti & Rafael Boix & Francesco Capone, 2009. "Why do creative industries cluster? An analysis of the determinants of clustering of creative industries," IERMB Working Paper in economics 0902, Institut d'Estudis Regionals i Metropolitans de Barcelona.
    16. Tóth, József, 2010. "Use of coordination fields in food economics," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52716, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    17. Kerstin Press, 2007. "When does defection pay?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 2(1), pages 67-84, June.
    18. Fiorenza Belussi & Silvia Rita Sedita, 2005. "The symbiotic division of labour between heterogeneous districts. The development of ornamental horticulture in the Netherlands and Italy," "Marco Fanno" Working Papers 0011, Dipartimento di Scienze Economiche "Marco Fanno".

    More about this item

    Keywords

    Clusters; organisation; knowledge transfer; transaction costs;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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